Life Insurance Free Look Period Explained
Learn about free look periods and how to use them when you buy life insurance.
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Buying life insurance is a big step for anyone. Once your life insurance policy starts, you won’t be able to cancel it without losing out on the premiums paid.
That’s why life insurance policies offer a free look period, allowing policyholders to cancel their coverage before it comes into force.
This article will cover free look periods for life insurance, tell you what you need to know about them, and show you how you can use them.
What Is a Free Look Period?
A free look period is an opportunity that you’ll get as a new policyholder to cancel your insurance policy without incurring surrender fees or additional charges.
Your free look period allows you to decide whether you want to fully commit to your signed insurance policy.
The length of time of a free look period will depend on your local state laws. However, in most states, you can expect your free look period to last anywhere from ten to thirty days.
You should use this feature to ensure that your life insurance is right for you. Free look periods protect consumers and are found in both permanent and term life insurance plans.
Term vs. Permanent Life Insurance
Term Life Insurance: This is life insurance for a fixed period or “term” that can last anywhere from 5 to 40 years. Once the life insurance policy term ends, so does the coverage.
Permanent Life Insurance: This is life insurance that doesn’t expire and pays out when a policyholder dies. Some popular permanent life insurance plans include whole life, universal life, and variable life insurance.
You can also get other types of life coverage, such as final expense and group life insurance. To learn more about them, read our guide on different types of life insurance.
How Does a Free Look Period Work?
Let’s say you’re interested in getting life insurance coverage and find a policy that meets your needs. After you’ve gone through the application process, the life insurance company will send a contract for you to review and sign.
You’ll have the free look period to review your terms and conditions, and decide whether you want the policy. If you don’t want to proceed, you can send the contract back and cancel it without having to pay any fees or penalties.
Here are some tips if you decide to cancel your life cover during the free look period:
Look through your contract and check the length of your free look period to avoid any problems. Some companies offer ten days, while others provide thirty days, so it’s essential to check beforehand.
Contact your insurance company directly or speak with a company representative. State that you want to cancel your life insurance policy with them and that you are currently in your free look period.
You should consult with your financial adviser before canceling your contract and ask them any questions you have about coverage and costs.
In some cases, the insurance company may deduct processing fees and other costs related to your life insurance application. Ensure that the amounts they’ve deducted are in line with their policies and that they are clearly stated in their terms.
Free Look Period vs. Grace Period
A free look period and grace period are different. Let’s look at both in more detail to understand how these two features are unique.
| Free Look Period | Grace Period | |
|---|---|---|
| When you use it | Applies to the initial purchase payment. | Applies to the subsequent premium payments. |
| Length of time | Length is 10 to 30 days depending on your state. | The length is usually one month, but no less than 30 days. |
| Purpose | Lets you cancel your contract for a total premium refund before your life insurance begins. | Allows you to make a late premium payment without losing coverage. |
Tips for Buying Life Insurance
Your free look period is an excellent way to avoid a long-term commitment that doesn’t suit your needs. However, doing your homework before you sign a life insurance contract can help you avoid delays in getting covered and give you the peace of mind you need.
Here are a few tips to help you find the right life insurance plan before you get to your free look period.
Use the experience and knowledge of a life insurance agent. Using an insurance agent to help you find life insurance can save you time and money in the long term. Insurance agents work on a commission basis and are paid by insurance companies, so you won’t have to pay anything for their services.
Do your research on any company that interests you. Before applying for a policy with specific companies, look into their track record, online consumer reviews, and financial stability. Doing your research will help you get a better picture of what you’ll experience if you decide to get a policy with them.
Get a few quotes from different companies before committing. It never hurts to shop around for a better deal that offers more value for your money. Get at least three or four quotes from various companies.
Look at what you’ll get for what you pay. In some cases, one life insurance provider may have slightly higher premiums but offer additional insurance riders that you can use to protect your beneficiaries. Go over the policy with your financial advisor to understand what you’ll be getting with your policy.
What Is an Insurance Rider?
An insurance rider is a clause or feature that you can add to your life insurance for added protection.
For example, an AD&D rider protects a policyholder if they are accidentally disabled and cannot work. With a rider like this, you’ll receive a specified amount to cover your premiums or help you pay bills after you’ve been injured.
To learn more, be sure to read our article on insurance riders.
Some other points to keep in mind:
Term life insurance plans are generally more affordable than permanent life cover.
Use an independent agent or marketplace platform, like PolicyScout, to find the best deals in your state.
Adding additional riders to your insurance plan will increase coverage costs.
What Is an Independent Agent?
An independent life insurance agent sells policies for multiple insurance providers. They are different from captive agents who sell insurance policies from one specific insurance company.
You can find out more about life insurance agents by reading this guide.
What If I Don’t Use My Free Look Period?
If you don’t cancel your policy during your free look period, your life insurance policy will be in force, and you’ll need to pay surrender fees to end the contract. You’ll also give up all the premiums you’ve paid toward your life insurance contract.
For example, let’s say you decide you want to end your life insurance two years into your contract. In this case, you won’t get back any of the premiums you’ve paid, and you may have additional fees to cover to end your contract.
It’s slightly easier to cancel a term life insurance contract as costs are generally lower and all you’ll need to do is to stop paying your monthly premiums.
With whole life or permanent life insurance plans, it’s a little bit more complicated as these plans usually have a cash value amount.
If you stop paying your premiums, your life insurance provider might use your cash value to cover these costs.
If you’ve had your life insurance for a while, there are alternatives you can look into. For example, selling your life insurance is something to look into if you need cash.
Before you cancel your insurance contract, speak to an insurance agent to see how you can keep your coverage or lower your monthly costs.
Where Can I Learn More about Life Insurance?
Free look periods are an excellent way to ensure that you’re happy with your term or permanent life insurance before you commit.
If you’re currently in your free look period, reach out to one of our agents today to see if you’re getting the best deal and find out if other plans offer better value for money.
To learn more about life insurance costs, coverage, and different terminology, visit our life insurance hub to read our latest articles and guides.
If you have any questions, we have a team of licensed insurance agents ready to assist. Call us today at 1-888-912-2132 or send an email to help@policyscout.com to get in touch.